It's a combination between Add and Subtract ink effects, with PNG's made in Photoshop. The sun bars are little more then trimmed up white gradients, and a lot of them. The way they slowly move past each other, using the add ink effect, makes them look like they're pulsating within undefined shapes.
I've got them lighty-effects in my game, but only underwater.
I think this game looks very good although some graphics have too much contrast. The bright mushroom does kinda stick out, I'd throw a new palette in there. Visually I think the weakest link are the sprites. The music is very nice too, quite Knytt-ish.
I used to work with him on it. But I got sick of his high-end graphical demands and left. The gameplay at that point was mainly just exploring the scenery. Brandon was having trouble getting the online enemies to work, so there wasn't any combat or anything (other than punching and kicking animations ). That was about 2 years ago. So, yea he's been working on it or a long time.
Game play is going to be more based around adventure and completing party based quests. This can include, but is not at all limited to killing enemies or solving puzzles. A system will be put in, to avoid level grinding, and will enforce working together in parties and will strongly discourage people just up and leaving, or not cooperating.
I do not want to make the cliché "hack and slash" MMO. A rather unique combat system will be implemented, but I need to enforce to everyone that combat will not be the main focus in this game.